At a crucial moment in world history, a meeting with potentially historic ramifications is about to take place: a joint meeting in Los Cabos, Mexico, of the G20 and B20 -- the heads of state and government of the world's 20 major economies, and the major business organizations of those nations.
The moment is crucial because the global economy remains in critical condition. The European debt crisis has the potential to create havoc for nations around the world. The United States, the usual engine of growth, is still sputtering. China, India, Brazil and other nations that have enjoyed phenomenal expansions in recent years are experiencing slowdowns.
Meantime, the leadership of nations around the globe is either under challenge or changing hands, from the U.S. presidential election, to the power shift about to take place in Beijing, to nearly a dozen new governments in Europe, to the continuing turmoil in the wake of the Arab Spring.
And all the while the world's population is aging, straining the ability of governments to finance health-care and pension systems.
Out of the dynamic interaction of these events a new world order is emerging, economically and politically. The task for leaders is to structure it in ways that will strengthen democracy, bring the benefits of growth to the greatest possible number of people and improve government transparency -- all while safeguarding the environment.
The G20-B20 meeting provides the right forum for addressing these global issues because it brings together the world's leaders with committed business leaders -- the public and private sectors positioned to take joint action to stimulate growth.
Historically, countries have grown faster when government and business work together. The private sector has a central role to play because businesses are at the heart of job creation and wealth creation. The public sector for its part must create the environment needed for businesses to operate and grow. There are several points on which the two sectors can find common ground, from encouraging international trade, with its low levels of risk and high levels of returns, to combating the corruption that has such a terrible effect on economic growth.
But if there is one area of cooperation that requires special attention, it is the strengthening of capital markets. The world's unmet infrastructure needs run into tens of trillions of dollars, and Standard & Poor's Rating Services estimate that in the largest economies -- the U.S., China, Japan, Europe and the United Kingdom -- banks and capital markets must finance up to $46 trillion for non-financial corporations in the next four years alone.
Only a more efficient global capital marketplace can meet these critical financing needs. As the B20's Task Force on Financing Growth and Development so accurately put it, "The shared agenda for the business community and government is to foster growth that promotes jobs and development [and] finance is the oxygen of economic growth" (emphasis added).
One way the G20 can help meet the massive demand for capital is through alternative funding sources, including deeper and more liquid debt markets around the world using bonds and other financial instruments.
Another measure is to increase financing for small and medium enterprises. SMEs are the lifeblood of many economies, yet they continue to face crippling credit restrictions. The response should be risk-guarantee programs, the creation of credit bureaus and similar measures
Policymakers, using the Financial Stability Board, need to coordinate fair and predictable regulatory and legal systems and open processes for funding and managing infrastructure projects. Rules must be enforced consistently, and judicial decisions should be expeditious.
Investors need transparency in the capital markets to help them evaluate the risk-return of infrastructure projects. Governments should recognize that the free flow of information will increase funding, but this requires the consistent regulation of research providers and the avoidance of measures that inhibit investors from properly evaluating the creditworthiness of projects in an interconnected world.
And multilateral institutions like the World Bank should play a bigger role in providing guarantees or other forms of support to pave the way for private sector investments.
Despite the extent of the world's capital needs, there are suitable investment pools available, not least from rapidly growing pension funds in emerging markets. Investors globally, faced with the demise of "risk free" sovereign and other assets, are seeking high quality alternatives.
By joining forces with the B20 in stabilizing and rationalizing capital markets, G20 policymakers will unlock the potential to foster investment and bring the benefits of renewed growth to a world that now stands at a crossroads.
McGraw is Chairman, CEO and President of The McGraw-Hill Companies, Vice Chairman of the International Chamber of Commerce and Chair of the United States Council for International Business.